SHORELINE COMMUNICATIONS, INC. CHANGE OF CONTROL AGREEMENT
Exhibit 10.13
SHORELINE COMMUNICATIONS, INC.
This Change of Control Agreement (the “Agreement”) is made and entered into effective as of
August 1, 2001 (the “Effective Date”), by and between Xxxxx X. Xxxxxx (the “Employee”) and
Shoreline Communications, Inc., a California corporation (the “Company”).
WHEREAS, the Company and Employee entered into a Stock Option Agreement dated August 1, 2001
(the “Option Agreement”) whereby Employee may purchase up to 825,000 shares of Common Stock (the
“Options”) for an aggregate purchase price of $82,500.00.
WHEREAS, the Options are subject to a vesting schedule wherein 1/48th of the
Options vest 1 month after the date of option grant (the “Initial Vesting Date”) and
1/48th of the Options vest each month thereafter.
WHEREAS, the Company may from time to time need to address the possibility of an acquisition
transaction or change of control event. The Board of Directors of the Company (the “Board”)
recognizes that such events can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to ensure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence
of a Change of Control (as defined below) of the Company, although no such Change of Control is now
contemplated.
WHEREAS, the Board believes it is in the best interests of the Company and its shareholders to
provide the Employee with an incentive to continue his employment and to motivate the Employee to
maximize the value of the Company upon a Change of Control for the benefit of its shareholders.
WHEREAS, the Board believes it is imperative to provide the Employee with certain benefits
upon a Change of Control, which benefits are intended to provide the Employee with sufficient
incentive and encouragement to remain with the Company notwithstanding the possibility of a Change
of Control.
WHEREAS, to accomplish the foregoing objectives, the Board has directed the Company, upon
execution of this Agreement by Employee, to agree to the terms provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, the Company and the Employee agree
as follows:
1. Change of Control. Upon a Change of Control, as defined below, that occurs while
employee is an employee of the Company, then a portion of the Options not yet vested pursuant to
the Option Agreement, shall immediately accelerate and become exercisable as to that number of
Options that would have vested if the Employee has remained
continuously employed by the
Company for a period of 12 months following the Change of Control; provided, however, that if the Change of Control occurs within the first year of Employee’s employment with the Company, 25%
of the Options shall immediately accelerate and become exercisable upon the consummation of the
Change of Control.
For example, if the Options vest as to 25% 12 months after the Vesting Commencement Date and
1/48th of the Options vest each month thereafter and if the Change of Control occurs one
year after the Vesting Commencement Date, 50% of the Options become exercisable on the consummation
of the Change of Control – 25% of which is accelerated and the other 25% because it is the first
anniversary of the Vesting Commencement Date – and 1/48th of the Options shall vest each
month thereafter. However, if the Change of Control occurred six months after the Vesting
Commencement Date, 25% of the Options shall immediately accelerate and become exercisable on the
consummation of the Change of Control, an additional 25% of the Options shall become exercisable on
the date that is one year after the Vesting Commencement Date, and 1/48th of the Options
shall vest each month thereafter.
Notwithstanding the foregoing, if such vesting acceleration would cause a contemplated Change
of Control that was intended to be accounted for as a “pooling of interests” transaction to become
ineligible for such accounting treatment under generally accepted accounting principles, as
determined by the Company’s independent public accountants prior to the Change of Control,
Employee’s Options shall not have their vesting so accelerated. For the purposes of the foregoing,
a Change of Control shall mean the occurrence of any of the following events:
(a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company’s then outstanding voting securities other than in a
private financing transaction approved by the Board;
(b) the direct or indirect sale or exchange by the shareholders of the Company or all or
substantially all of the stock of the Company;
(c) a merger or consolidation in which the Company is a party and in which the shareholders of
the Company before such merger or consolidation do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the Company after such transaction; or
(d) an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets.
2. Limitation on Payments. In the event that the benefits provided for in this
Agreement (i) constitute “parachute payments” within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section, would be subject to
the excise tax imposed by Section 4999 of the Code, then Employee’s benefits shall be payable
either in full, or as to such lesser amount which would result in no portion of such benefits being
subject to excise tax under section 4999 of the Code, whichever of the foregoing amounts, taking
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into account the applicable federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by Employee on an after-tax basis, of the greatest amount
of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section
4999 of the Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 2 shall be made in writing by the Company’s independent
public accountants (the “Accountants”), whose determination shall be conclusive and binding upon
the Employee and the Company for all purposes. For purposes of making the calculations required by
this Section 2, the Accountants may make reasonable, good faith interpretations concerning the
application of Section 280G and 4999 of the Code. The Company and the Employee shall furnish to
the Accountants such information and documents as the Accountants may reasonably request in order
to make a determination under this Section. The Company shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by this Section 2.
3. Attorneys’ Fees, Costs and Expenses. The prevailing party, determined without
regard to whether or not the action results in a final judgment, shall be entitled to collect from
the other party its reasonable attorneys’ fees, costs and expenses incurred in connection with any
action brought by either party in connection with the subject matter of this Agreement.
4. Successors.
(a) Company’s Successors. Any Successor to the Company (whether direct or indirect
and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets which executes and delivers the assumption agreement described in
this Section 4(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee’s Successors. The terms of this Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.
5. Notice. Notices and all other communications contemplated by this Agreement shall
be in writing and shall be deemed to have been duly given when personally delivered or when mailed
by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to the attention of its
Secretary.
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6. Miscellaneous Provisions.
(a) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by
Employee and by an authorized officer of the Company (other than Employee). No waiver by
either party of any breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or provision of the same
condition or provision at another time.
(b) Whole Agreement. No agreements, representations or understandings (whether oral
or written and whether express or implied) which are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof.
(c) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California as applied to agreements entered
into and performed within California solely by residents of that state.
(d) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(e) Counterparts. This Agreement may be executed in counterparts, each of which shall
be an original, but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year first above written.
| SHORELINE COMMUNICATIONS, INC. | ||||||
| By: | /s/ Xxxx X. Xxxxx | |||||
| Xxxx X. Xxxxx | ||||||
| President and Chief Executive Officer | ||||||
| EMPLOYEE | ||||||
| /s/ Xxxxx X. Xxxxxx | ||||||
| Xxxxx X. Xxxxxx | ||||||
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